Payment gateway, cash on delivery, installments or transfer: how to choose payment options for the e-shop?

Payment gateway, cash on delivery, installments or transfer: how to choose payment options for the e-shop?

Payment gateway: There are many ways a customer can pay for their order in the e-shop. What does the trader have to think about when choosing?

The establishment of an e-shop is associated with several steps, such as selecting a suitable system, creating the online store itself, uploading items with an offer of goods, or choosing between the transport methods by which you deliver orders to customers. However, one of the most important components, in the end, remains what will feed you and the business – payment options. As with shipping options, it’s a good idea to offer customers multiple ways to pay for their orders. If people do not like the payment option of your e-shop, they will probably not make their purchase and they will also leave the “loaded” cart. Payment service providers, as well as e-shop operators for Podnikajte.sk have revealed:

  • what payment options exist,
  • what essentials are associated with each species,
  • according to which to choose the payment methods you offer to customers.

Cash on delivery is still the most popular payment option when taking over the goods

A common form of payment for goods that online stores offer to customers is cash on delivery. This is an additional payment for the order, e.g. courier or in person at a stone plant. Customers appreciate this option, especially in lesser-known or new stores, because it offers them a sense of security. “The customer wants to pay only when he has the goods in his hands, which is understandable. This is still the most common method, about 65% in our country, “says Ján Pazdúr, CEO of the nabbi online store. The same opinion is held by Michaela Sirotová from Andrea Shop, according to whom one of the advantages of cash on delivery payment is the credibility of the brand.

Although the concept of cash on delivery may be associated with limiting payment to cash, in many cases it is now possible to use a payment terminal. Cashless payments have also come to the fore due to the pandemic, with contactless payment, in particular, enjoying increasing popularity. Customers will therefore often be pleased if the e-shop offers the option of paying on delivery and, in addition, allows them to pay by card. They thus feel safer and at the same time more comfortable or faster to take over their order. Cash on delivery cards may also be suitable for target groups of food e-shops such as Lunys. In their case, the order can be paid not only with a regular card but also with a meal voucher. The merchant can secure the payment terminal if he has his own transport and decides to allow customers to pay by cash on delivery, but they also have several courier services. In the case of personal collection, it depends on the stone operation or supports payment by card.

However, cash on delivery also brings with it certain inconveniences that the e-shop operator should keep in mind. ” Failure to pick up the shipment or withholding money (especially at the post office) is a common problem in this case. The costs of returning the goods and their processing are also associated with non-acceptance of the shipment, “says Michaela Sirotová. Ján Pazdúr reminds us that it is necessary to take into account the fee for cash on delivery for transport (0.70 – 1 euro) and when paying by card it is still a  transaction fee of about 1%. For these reasons, cash on delivery in online stores is usually the most expensive option.

Payment by card in advance has several forms and advantages for e-shops

You can also pay by card in advance, with more options. It can be paid through a payment gateway offered by banks as well as private companies. There are also mobile payments via Google Pay or Apple Pay. All options combine one thing – the customer pays for his order when ordering, which is convenient for both him and the merchant. “The customer does not have to deal with the payment when taking over the goods, and with us, the payment automatically goes to the account. It is only paired with the order. We have transaction costs (fees) with that, but comfort for both parties prevails, “says Ján Pazdúr from nabbi.

Jozef Vencel from Lunys sees the advantage of payment by card in advance also in the fact that the customer does not have to come into physical contact with the carrier or can pay for goods that e.g. order to the address of your loved ones, family, or friends. Michaela Sirotová from Andrea Shop says again e.g. about a possible simple refund of the payment to the customer’s account. According to Klaudie Lukačovičová, account managers Besteron firms that e-commerce business to mediate payment gateway, the advantage of this method follows: “The trader has immediate information about the payment orders, to accelerate the delivery of goods and eliminate the unclaimed packages of cash on delivery payments. The possibility of online payment also increases the overall conversion of thee-shopBranislav Barbirík, the business relationship manager of 24-pay, which also offers payment gateway services, considers the advantage to be higher credibility of the merchant: “If the e-shop provides an online payment service, it is already proven and generally reliable.”

Payment gateways from banks

The payment gateway service in Slovakia is provided by several banks. It goes e.g. about VUB, Tatrabanka or Slovenská sporiteľňa. Banks provide payments via internet banking or by card. However, in the case of internet banking, the buyer must have an account with a specific bank, which can be a significant disadvantage. It is therefore worthwhile to include among the options a system for payment by card, through which the customer enters its number (regardless of which bank is the client), the necessary data, and then pays. In the case of e.g. VUB is an eCard payment gateway, Tatrabanka has a CardPay, and Slovenská sporiteľňa has an external GP webpay system.

As card payments become more and more popular, banks are constantly creating new services. E.g. In addition to the above, Tatrabanka also offers ComfortPay (intended for companies where regular customers make repeated purchases, so they have the opportunity to store payment card details and simplify further purchases) or Slovenská sporiteľňa so-called GP easy2sell (sale of goods directly through this application, which can also be used by sellers who do not have an e-shop).

If a merchant decides to set up a payment gateway from one of the banks, he should usually be its client. Subsequently, it is necessary to address it with demand and conclude a contract. For the provision of such a service, banks charge percentages as a share of profits and a fixed fee. These can be monthly payments or charges automatically deducted from each transaction.

Payments by card through the bank’s payment gateway usually look like after selecting this option, the customer enters the mentioned data from the payment card on the e-shop page (it can also be redirected to the payment gateway page). The whole process needs to be confirmed, and strong payment service user authentication is required from 1 January 2021. It is a combination of security features, e.g. PIN, control questions, biometrics, fingerprints, etc. Subsequently, the payment is processed, while the customer is informed about this process and redirected back to the e-shop website. The payment is then credited to the merchant’s business account within a few hours to days.

Payment gateways from fintech companies

Payment services through payment gateways are also provided by private companies. There are more of them on the market, but according to account manager Besteron, the differences between payment gateways are no longer as great as a few years ago. They work in much the same way as payment gateways from banks. The differences may be lower fees or simpler equipment. The advantage is also that it does not matter what bank the e-shop operator is a client to.

If a merchant opts for a payment gateway from a private company, the procedure is usually similar. Klaudia Lukačovičová explained how this happens at Besteron: “The client can contact us by phone, e-mail, fill in the form on the website or create an account directly by registering on our website. After registration, the client can still test the payment gateway in his e-shop but is unable to accept payments. After agreeing on the terms of cooperation, we will ask him to fill in applications and deliver documents important for concluding the contract. After approval by our risk management department, we will sign a contract with the client and activate his payments at the same time, he adds that the approval process in the case of an application for the implementation of a payment gateway for card payments takes about 1-3 weeks, it affects the type of business and how difficult it is to assess the company in terms of possible risks associated with online payments. “After activating the client’s payments, we inform you about the launch of the payment gateway, and then it is up to him how quickly he will put it into operation on his e-shop.” Similarly, Branislav Barbirík from 24-pay recommends contacting the trader, selecting the gate, and then concluding a contract with it. According to him, the implementation of the payment gateway in the 24-pay company is usually 2-3 working days.

Prices for the implementation of the payment gateway are usually set individually. However, subsequent costs may be associated with modifying the site or application. “On the 24-pay side, we provide implementation support within the services. The client will receive an implementation manual, a test interface, and plug-ins and consulting for the most used systems. There is nothing extra for it, “explains Branislav Barbirík.

The e-shop operator must also think about the subsequent transaction fees. E.g. in Besteron, the final price per transaction depends on the monthly turnover through the payment gateway, the average transaction, and the type of product/service sold. “Basic prices for all payment gateways are generally around 0.9% – 1.5% per transaction. We do not charge fees for cancellation of payments, for the transfer of payment to the client’s account, or a monthly fee for the management of the payment gateway, “explains Klaudia Lukačovičová.

Representatives of payment gateway operators agree that the use of this method does not subsequently require service from the owner of the e-shop. “A request for payment comes from the online store to the payment gateway, then information is sent from the payment gateway whether the payment was successful or not. Everything is automatic. In the admin interface, the client or operation has statements and invoices at its disposal and can thus check the correctness of received payments, ”explains Branislav Barbirík from 24-pay.

All payments are then sent to the entrepreneur’s account, e.g. Besteron clients receive a one-day batch as a cumulative payment. “Transaction fees have already been deducted, the merchant will receive a detailed statement of transactions, which contains all the important information for posting received payments of deducted fees,” explains Lukačovičová.

Convenient mobile payments for the customer

Mobile payments, also known as Google Pay or Apple Pay applications, are part of the offer of the already mentioned companies, which also provide payment gateways. They provide an advantage, especially to customers. Those who use any of these applications have all the card data stored directly on the device and do not need to have it physically with them. Ján Pazdúr states that this is a frequently used service.

On the cost side, it says that even here, transaction fees are paid according to the tariff of the payment gateway through which the service is made available. If the merchant is interested in providing this payment method, it is necessary to inform the selected company and agree on the terms and conditions.

Bank buttons only for clients of a specific bank

One of the payment options for fintech companies or banks that provide payment gateways is the bank button payment service. “Slovaks are very conservative, so some use the fast payment buttons of their banks if their bank provides this option,” informs Branislav Barbirík from 24-pay. Each bank has its own button, which the e-shop can place among its options and only its client can use it.

If the merchant decides to use the bank button through a private company that provides this option, the advantage for him is that he can have an account in any bank, and with one contract and one implementation he will get all the bank buttons at the same time. “If a trader solves bank buttons directly with banks, he would have to open an account in each bank and sign a contract with them,” Lukačovičová points out. At the same time, he adds that bank buttons are less expensive for e-shop operators than paying by card, as fees are not paid to VISA, MASTERCARD (interchange fees, fees to card schemes).

Transfer to the account is less used, but low cost for the e-shop

Another method that is common among payment methods in e-shops is bank transfer to the account. “Payment details, in this case, are usually sent to the customer by email. The payment is made by transfer to the account and the goods are sent after being credited to the merchant’s account, “describes the service  Michaela Sirotová, sales director of Andrea Shop. Although he sees the obligation to pay for the order immediately after its creation as an advantage of this method, he also adds that the transfer can take several days, for example during weekends or holidays. Another disadvantage can be the lengthy completion of data in the customer’s internet banking. “Nevertheless, some customers prefer this method of payment,” adds Sirotová. Ján Pazdúr from the company nabbi notes that a significant advantage, according to him, maybe that for the e-shop operator this method does not mean any transaction costs, i.e. it is free.

Installment payment is a longer process, but an attractive option for expensive goods

Especially for larger or more expensive orders, people want to split the amount over time. Many sellers, therefore, offer sales in installments. “After completing the order, the customer is redirected to the company’s website, where he fills in the necessary information for the loan. This method of payment pays off if the e-shop sells more expensive products (electronics, furniture, etc.), which customers can pay through a trustworthy company, “describes Michaela Sirotová.

The advantage may be that the trader does not incur any costs other than the implementation of the service. However, there may be more disadvantages for him. According to Ján Pazdúr, this is a longer approval process and administrative complexity. Delivery of goods in installments takes longer until all formalities have been completed. In Slovakia, this payment option is offered by several companies, such as Cetelem, Quatro, HomeCredit, or Ahoj.

What to think about when choosing payment options in the e-shop?

As when deciding on transport options, when choosing between payment methods, it is necessary to consider what range the merchant offers. For example, the said installment purchase may not be offered by a toy, book, or clothing retailer. However, if there are already more expensive products for its customers, it can be attractive for them to share a larger amount within a few months.

The frequency of service use by customers also plays a role in decision-making. Not all methods are sought after today. Ján Pazdúr from the company gives Nabcoin payments as an example. Although such a possibility exists, it is such a marginal form of payment that it makes no sense for them to think about it at all.

In the Lunys food e-shop, they, in turn, conducted an internal customer survey to make sure they chose the right payment methods that suited them best. They chose only two in the offer – payment upon receipt of the goods and payment by online card. Jozef Vencel describes their implementation process on the store’s website as follows: “The procedure involved concluding agreements with each payment service provider- for payment cards, for the payment gateway and for each meal voucher company (we offer payment by meal voucher cards from four companies). In the e-shop, we also had to integrate the payment gateway into the website itself with the payment service provider, as well as the developers of the e-shop online application, and then modify this application to be suitable for the sale of food, fruit, and vegetables. The final amount also depends on the actual weight of the selected goods that the customer orders. These are items that are sold by weight, e.g. fruits, vegetables, meat. “

When implementing a payment gateway, it can also be decisive whether it is a large, medium or small seller in terms of the size of the e-shop and its system solution. “The largest clients usually have a tailor-made e-shop solution, so they can implement almost any payment gateway. They consult with the developer about the choice of payment gateway, but they also decide on the basis of price or references, “describes Klaudia Lukačovičová from Besteron. At the same time, based on experience, it states that small and medium-sized e-shops focus more on the costs associated with the payment gateway and its implementation.

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